In order for a company to survive, strategies must be used to strive in the competitive world of business. There are three various types business strategies that is widely known and used for competition in any industry. These basic strategies are overall cost leadership, differentiation, and focus. The company, Dell uses overall cost leadership strategy. The popular electronic-device company began its successful journey with a simple strategy. The strategy that the company uses is to "sell directly to the customer and concentrate on value".(Easy as Dell:Time Magazine) This tactic has been very successful for Dell for it has become one of the leading service providers in the world.
In the computer manufacturing industry such as Dell, buyer power is high because according to Dell Computer Corporation customers are able to customize their products with various types of choices such as operating system, style, applications, and etc. Supplier power is low because Dell has a few choices from whom to buy. For instance, Dell only offers a limited choices of operating systems as well as processors. The supply is low because operating systems or processors are not compatible with some laptops or desktops. Threats of substitute products or services are high because there are many alternatives to choose from. There are many companies that offer the same electronic devices which is International Business Machines Corp.(IBM) and Hewlett-Packard Company (HP) Threat of new entrants is high because there are significant entry openings to enter into the market. Rivalry among existing competitors is high since overall competition is very intense. They increase the buyer power by using IT-enabled process. Dell would not want to reduce their buyer power, instead they would increase in that area having only few choices of software companies to buy from. Dell creates switching costs by having fair prices according to the each computers functions and capabilities. Most customers are willing to pay such prices, especially since their product is customed designed. They create entry by providing the expected high quality software, hardware, memory, warranty, tech support, as well as standard features.
Dell Computer's Supply Chain Management (SCM) system gives the company a great advantage compare to other traditional computer manufacturers. Dell sells computers directly from its website so there is no inventory in its distribution chain. Traditional computer manufacturers have the computers sit in the warehouse until someone buys it. This holds on to inventory in a distribution chain, which cost a lot of money due to the payment for the operation of the warehouse while waiting until the computers are purchased. Computers also become obsolete which means the price has to be reduced because of new models. Dell also uses i2 supply chain management software to send ordered parts to manufacture and costumers. Dell keeps the cost of purchased parts and products at a low price which is why it's a bottom-line initiative. The type software that Dell uses is system software. Depending on the model of the computer correlates with the version of the windows software.
Matrix is the type of IT culture that is used in Dell's Computers. Apart from Dell's order to build and principles of direct marketing, there are also some fundamental principles to their business strategy. That is collaboration. Instead of Dell keeping inventories on hand in a warehouse which is very expensive, Dell sends out information to rest of the organizations and suppliers of different parts. Information is then used to customize their computers as soon as a computer is ordered. Thereby reducing cost and improving services. Collaboration tools can yield great benefit in a business environment. Organization's placement or use of information technology functions depends on the organizations philosophy as to deployment, development and the use of IT. The philosophical approach that is used by Dell is decentralized approach which is also known as early adopters of technology. It encourages technology innovation; a system whereby new technologies are experimented even if it fails. Decentralized early adopters helps the company to stand out from other companies where computer consumers are able to choose what their purchases will look like in terms of applications, software and operations in their finished products.
